It is well known at this point that NFTs are not universally accepted around the world and that some countries are more hostile towards them than others. But one thing appears to be consistent among countries that are more cautious about NFTs and this is a wariness towards ‘speculative’ NFTs, with China outright banning them.
Interestingly, it appears that a similar thing is happening in South Korea as a court has banned the launch of a play-to-earn (P2E) NFT game. The reason given for this by the courts is that the NFTs within the game are speculative.
The P2E Game Saga
The game at the centre of this case is called ‘Five Stars for Klaytn’ and was developed by a South Korean company called SkyPeople. Within the game, players operate as digital characters and earn rewards which may be swapped for NFTs. And this is where the issue comes in.
South Korean courts have decided that the NFTs act as a form of ‘reward’ and thus, are unlawful.
“The court found that the ban on domestic distribution of P2E (Play to Earn) games, that is, ‘money-making games’, was reasonable because non-fungible tokens (NFTs) paid as game rewards were used as speculative prizes,” said a local report, noting that the promotion of such NFTs constitutes speculation.
And, under article 28, Subparagraph 3 of the Game Industry Promotion Act (Game Industry Act), the promotion of speculative assets is banned. This further meant that the Game Rating and Administration Commission was unable to classify the game and blocked its release.
SkyPeople tried to appeal this decision on the basis that the NFTs acted more as a representation of ownership than as speculative rewards. But the judge was not convinced, noting that ownership of the NFTs can be established whether or not the owner even plays the game as the assets are traded outside of the app.
“The game item NFT does not only have meaning as a unique address of digital assets, but can recognize property value in itself. The reality is that there has not been a proper social consensus on the legal nature and regulatory method of NFTs,” the judge said, siding with the commission.
A lawyer representing the commission also noted that the same mentality can be applied to other NFT P2E games and that they might struggle to get a rating within the country.
The Trouble With Games
This is a landmark case in that it is one of the first times that a court in South Korea is ruling on an NFT game. And because of this, it sets a precedent for other games in the space. As the lawyer representing the commission said, P2E games might receive similar rulings stating that their assets are speculative and might not be able to get a rating.
As such, NFT games in South Korea might have to overhaul their business model to stay within the confines of the country’s law and remain operational.